Put NHIF at the centre of health planning

The greatest 20th-century political battle revolved around the question of the best political and economic system to manage humankind’s affairs.

Two opposing viewpoints clashed. Communism was based on the idea of eliminating socioeconomic class struggles by creating a classless society in which everyone shares the benefits of labour and the state controls all property and wealth. On the other hand, capitalism means an economic and political system in which a country’s trade and industry are controlled by private owners for profit.

The 20th century ended with the collapse of communism. One key lesson from that collapse was that governments are poor in managing some key sectors as compared to the private sector. It became clear that governments are slow in decision-making due to bureaucracy and hence poor in innovation.

Governments have a higher propensity towards corruption due to inbuilt vested interests. A good example in Kenya is in public broadcasting. The Kenya Broadcasting Corporation is technically insolvent and its losses stand in excess of Sh40 billion. These findings are contained in various reports of the Auditor-General.

KBC operates on negative capital and its employees’ statutory deductions are in arrears. Despite this, KBC has huge tracts of land that it can dispose of and defray some of these arrears. Its viewership has declined over the years. Meanwhile, the market leader in Kenya’s broadcasting sector — a private player — occupies a quarter of an acre and makes all the profits through innovative programming.

However, despite capitalism winning, there is one sector which everyone seems to agree needs to be retained generally in the public realm. That is the health sector and for several reasons. First, moral ethics demand that everyone should be treated equally and with dignity.

Human life cannot be commoditised and traded in the market. Second, health — like defence — requires a lot of spending and hence no good profit can be made. And if profit is to be made, it would mean detaining patients with unpaid bills or denying emergency services, which is unethical.

Third, the privatisation of health can create private monopolies. Keeping health in the public sector prevents abuse of monopoly power. Further, to please shareholders, private firms in the health sector may seek to increase short-term profits and avoid investing in long-term projects. Therefore, there may be a lack of investment in expensive but necessary research, for example.

This does not mean the public sector does an excellent job in healthcare. The budgetary strain has been a major negative. Public health systems are increasingly coming under economic pressure due to the high cost of new drugs and technologies; the ageing of the population, with older persons requiring more and often more expensive health care; and rising expectations about the use and quality of health care services.

Consumer preference may also encourage the privatisation of health. Consumers may prefer private facilities because they believe they will gain access to better quality care or escape from long waiting lists and other unappealing patient conditions. 

Staff and drugs 

Private-sector providers are more geographically accessible and have greater availability of staff and drugs. Indeed, government-owned National Health Insurance Fund (NHIF) data shows Kenyans are voting with their legs. It shows seven out of 10 Kenyans with NHIF cards prefer private hospitals.

However, this should not be used as an excuse by the government to defund NHIF. The fund is important to ensure the poor access to quality healthcare. The government, particularly the Jubilee administration, created conditions whose net effect was to frustrate NHIF and hence deny the poor access to quality healthcare.

It did this by getting some of its key departments out of NHIF. The Kenya Police and Kenya Prisons enhanced medical comprehensive schemes shifted from NHIF to private companies. Several county governments have followed suit. Teacher Service Commission, the largest public sector employer, has refused to cover its workforce under NHIF. Some private medical insurance companies employ not-so-ethical means to snatch this business from NHIF.

These moves are wrong for the following reasons.

First, insurance works on the principle of pooling. The concept of ‘risk pooling’ means the higher costs of the less healthy will be offset by the relatively lower costs of the healthy. In general, the larger the risk pool, the more predictable and stable the premiums can be.

Pooling “is the spreading of losses incurred by the few over the entire group, so that in the process, the average loss is substituted for actual losses.” Pooling involves “the grouping of a large number of exposure units so that the law of large numbers can operate to provide a substantially accurate prediction of future losses”. 

Second, removing people working in the formal sector from NHIF exposes the fund to ‘adverse enlisting’. These people will only seek medical services when they actually fall sick, which does not arise often. The opposite is true for people in the informal sector — they will enlist for NHIF when they clearly expect to get sick.

For example, they will take NHIF when their wives are pregnant in anticipation of getting free maternity services or when they need to undergo chemotherapy and they will stop contributions immediately afterwards. In short, private insurance companies are snatching less risky medical insurance business from NHIF, and leaving behind the most risky business.

NHIF data suggests that out of 10 persons in the formal sector with NHIF cards, only three will seek medical services in any year. In the informal sector, seven persons will.

Third, when a person with two medical insurance schemes (a private medical insurance card and NHIF) gets into a medical situation, hospitals often give NHIF the first charge. The private card gets expended only after exhaustion of the NHIF limit. NHIF, therefore, carries a disproportionate financial burden. The law had been amended to remedy this but the courts stayed this new provision.

For these reasons, NHIF is under pressure, which requires urgent remedial action. First, all public employees need to shift back to NHIF. Second, the Attorney-General needs to ensure the government wins the case that stayed an amendment to the law that sought to cure a major lacuna.

Dr Kang’ata is the Governor of Murang’a County.